Dear Members, Your Directors are pleased to present the Twenty Third Annual Report on the business operations together with the Audited Financial Statements for the financial year ended 31st March, 2016 and on the state of affairs of the Company as on the date of this report. Corporate Overview Sarla Performance Fibers Limited (Your Company) is engaged in the business of Specialty Yarn for Last 22 Years having 25 Manufacturing Plants at Silvassa, UT of Dadra & Nagar Haveli and 1 Dyeing Plant at Vapi, Gujarat and Wholly Owned Subsidiaries (WOS) at British Virgin Islands (BVI) and United States of America (USA) with Groups Corporate Office situated at Mumbai. Directors Report BUSINESS PERFORMANCE: Operations: During the year under review the sales of the Company were Rs. 25,594.13 Lacs as against Rs. 27762.73 Lacs in 2014-15 a slight decline of 7.81 %. The FOB value of exports Rs. 15,193.24 Lacs compared to Rs 15,693.58 Lacs. Profitability: The profit before Depreciation, Interest & Tax was Rs. 7,197.69 Lacs as compared to Rs. 5,646.31 Lacs In Previous year, after providing for depreciation of Rs. 1,014.40 Lacs (Previous Year Rs. 913.55 Lacs) & provision for taxation of Rs. 1207.10 Lacs (Previous Year Rs. 1,283.60 Lacs), there was a net profit of Rs. 4,265.83 Lacs as compared to Rs. 2,967.94 Lacs in the Previous Year. MANAGEMENT DISCUSSION & ANALYSIS: This section of the Directors' Report has been included in adherence to the spirit enunciated in the Code of Corporate Governance approved by the Securities and Exchange Board of India. Statements in this Management and Discussion Analysis describing the Companys objectives, projections, estimates and expectations, may constitute forward looking statements within the meaning of applicable laws and regulations. Although the expectations are based on reasonable assumptions, the actual results might differ. The key to growth is the introduction of higher dimensions of consciousness into our awareness. - Lao Tzu Particulars Financial Year ended March 31, 2016 Financial Year ended March 31, 2015 FINANCIAL SUMMARY HIGHLIGHTS The highlights of the performance of the Company for the year ended March 31, 2016 is summarized below: 25,594.13 (1,250.39) 24,343.73 2,181.88 26,525.61 7,197.69 508.07 1,014.40 5,675.21 (1,207.10) 202.27 4,265.83 6,836.62 269.59 11,372.04 208.75 668.02 178.49 1,500.00 8,816.77 27,762.72 (1,069.91) 26,692.80 1146.98 27,839.79 5,646.31 514.48 913.55 4,218.28 (1,283.60) 33.26 2,967.94 6,143.42 88.59 61.74 9,261.70 668.02 133.56 1,500.00 6,836.62 Sales & Operations Less: Excise Duty Net Sales Add: Other Income TOTAL INCOME Profit Before Interest, Depreciation & Tax Less: Finance Cost Less: Depreciation &amortization PROFIT BEFORE TAX Less: Provision for Taxation - Current - Deferred - Earlier Years - MAT credit Entitlement NET PROFIT AFTER TAX Balance bought forward Excess provision for Dividend distribution tax written back Effect of Change in Method of Depreciation AMOUNT AVAILABLE FOR APPROPRIATION APPROPRIATION: - Proposed Dividend - Interim Dividend Paid - Dividend Tax - Transfer to General Reserve BALANCE CARRIED FORWARD (Rs. in Lacs) 10
9
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Dear Members,
Your Directors are pleased to present the Twenty Third Annual
Report on the business operations together with the Audited
Financial Statements for the financial year ended 31st March, 2016
and on the state of affairs of the Company as on the date of this
report.
Corporate Overview
Sarla Performance Fibers Limited (�Your Company�) is engaged in
the business of Specialty Yarn for Last 22 Years having 25
Manufacturing Plants at Silvassa, UT of Dadra & Nagar Haveli and 1
Dyeing Plant at Vapi, Gujarat and Wholly Owned Subsidiaries (WOS)
at British Virgin Islands (BVI) and United States of America (USA)
with Group�s Corporate Office situated at Mumbai.
Directors� Report
BUSINESS PERFORMANCE:
Operations: During the year under review the sales of the
Company were Rs. 25,594.13 Lacs as against Rs. 27762.73 Lacs in
2014-15 a slight decline of 7.81 %. The FOB value of exports
Rs. 15,193.24 Lacs compared to Rs 15,693.58 Lacs.
Profitability: The profit before Depreciation, Interest & Tax was
Rs. 7,197.69 Lacs as compared to Rs. 5,646.31 Lacs In Previous
year, after providing for depreciation of Rs. 1,014.40 Lacs (Previous
Year Rs. 913.55 Lacs) & provision for taxation of Rs. 1207.10 Lacs
(Previous Year Rs. 1,283.60 Lacs), there was a net profit of
Rs. 4,265.83 Lacs as compared to Rs. 2,967.94 Lacs in the
Previous Year.
MANAGEMENT DISCUSSION & ANALYSIS:
This section of the Directors' Report has been included in adherence
to the spirit enunciated in the Code of Corporate Governance
approved by the Securities and Exchange Board of India.
Statements in this Management and Discussion Analysis describing
the Company�s objectives, projections, estimates and expectations,
may constitute �forward looking statements� within the meaning of
applicable laws and regulations. Although the expectations are
based on reasonable assumptions, the actual results might differ.
The key to growth is the introduction of higher dimensions of consciousness into our awareness. - Lao Tzu
ParticularsFinancial Year ended
March 31, 2016Financial Year ended
March 31, 2015
FINANCIAL SUMMARY HIGHLIGHTS
The highlights of the performance of the Company for the year ended March 31, 2016 is summarized below:
25,594.13
(1,250.39)
24,343.73
2,181.88
26,525.61
7,197.69
508.07
1,014.40
5,675.21
(1,207.10)
202.27
�
�
4,265.83
6,836.62
269.59
�
11,372.04
208.75
668.02
178.49
1,500.00
8,816.77
27,762.72
(1,069.91)
26,692.80
1146.98
27,839.79
5,646.31
514.48
913.55
4,218.28
(1,283.60)
33.26
�
�
2,967.94
6,143.42
88.59
61.74
9,261.70
668.02
�
133.56
1,500.00
6,836.62
Sales & Operations
Less: Excise Duty
Net Sales
Add: Other Income
TOTAL INCOME
Profit Before Interest, Depreciation & Tax
Less: Finance Cost
Less: Depreciation &amortization
PROFIT BEFORE TAX
Less: Provision for Taxation
- Current
- Deferred
- Earlier Years
- MAT credit Entitlement
NET PROFIT AFTER TAX
Balance bought forward
Excess provision for Dividend distribution tax written back
Effect of Change in Method of Depreciation
AMOUNT AVAILABLE FOR APPROPRIATION
APPROPRIATION:
- Proposed Dividend
- Interim Dividend Paid
- Dividend Tax
- Transfer to General Reserve
BALANCE CARRIED FORWARD
(Rs. in Lacs)
10
A. Business Overview
Economy: The Global economy disappointed in terms of growth,
with deceleration of activities in key emerging and developing
economies like China, Brazil, Russia overshadowing a modest
recovery in major high income countries. The deceleration was
accompanied by declines in commodity prices, subdued global
trade, bouts of financial market volatility and weakening capital
flows. India was a notable exception, growing at 7.6% as per Central
Statistical Office (CSO) estimates, despite declines in exports.
Inflation has come down, however industrial activity and
consumption have not been buoyant.
Three key transitions will influence the global outlook for growth �
pace of rebalancing in China, commodity prices and monetary
policy actions in the US and other major economies. For India,
though the long term prospects for continued growth remain
undiminished, actual pace will depend on revival in private
investment and rural consumption, strengthening of banks balance
sheets and Continued implementation of economic reforms.
Business Overview: Sarla Performance Fibers Limited is a leading
exporter of Regular as well as High Tenacity Polyester and Nylon
Yarns. It started operations 22 years ago as a commodity
B. Opportunities and Threats:.
The Indian Textile Industry is one of the leading textile industries in
the world. It is one of the key sectors of India�s manufacturing
segment as it contributes significantly to the economy in terms of
employment generation and foreign exchange revenue.
Indian Textile and Apparel industry contributes about 14% to
industrial production, 5% to GDP and 17% to country�s export
earnings.
The domestic textile and apparel industry in India is estimated to
reach US$ 223 billion by 2021 from US$ 108 billion in 2015. The
fundamental strength of this industry flows from its strong
production base of wide range of fibres and yarns ranging from
natural fibres to man-made fibres.
The future for the Indian textile industry looks promising, buoyed by
strong domestic consumption. The Government has introduced the
Amended Technology Upgradation Fund Scheme (ATUFS) to give a
further boost for technology investment in the textile industry. The
ATUFS targets employment generation, exports, conversion of
manufacturer of Man Made Fiber but transformed into a high value
added yarn maker in the past decade. It has an installed capacity of
11,900 tons per annum for manufacturing yarns in Silvassa and 3200
tons per annum for a Dyeing unit at Vapi. Its state of the art 30 tons
per day POY plant in Walterboro, South Carolina in the US is now
fully stabilized and operating at 30% plus capacity. The company�s
emphasis this year will be to focus on increased capacity utilization at
its US plant, enhance the proportion of niche end user applications in
India, higher value added yarns to leading global apparel brands and
companies. The company exports to 45 countries.
SPFL also owns Wind Power Capacity of 10.25 MW in totality, out of
which 6 MW is located in the state of Maharashtra, 1.25 MW is
located in the state of Gujarat and 3 MW is located in the state of
Madhya Pradesh. Our plant load factor for the fiscal year 2016 was
about 23%.
Customer Segments and Growth: The Company's customer
segments can be divided into three parts:
1) Commodity Yarn.
2) Industrial Yarn.
3) Performance Yarn.
Directors� Report
RegionsFY 2015-16
(% of Export Sales)FY 2014-15
(% of Export Sales)
Turnover Break Up (Geographical)
27.53
35.34
3.99
33.14
100.00
18.27
38.20
6.35
37.18
100.00
South, North & Central America
Middle East & Europe
Africa
Asia Pacific
In all, we export to over 45 countries and to 127 customers. Our customer concentration is well distributed and no single customerexceeds more than 10% of our revenue.
SegmentsFY 2015-16
(% of Total Sales)FY 2014-15
(% of Total Sales)
Turnover Break Up (Customer Segment-wise)
17.96
45.05
36.99
100.00
17.76
43.54
38.70
100.00
Commodity Yarn
Industrial Yarn
Performance Yarn
11
Discontent is the first necessity of progress.
Love dies only when growth stops.
existing looms to better-quality technology looms and improved
quality of processing industry. The ATUFS is expected to act as a
catalyst to the Government�s �Make in India� campaign for the textile
sector. Approval has also been given for 24 new textile parks which
will further create employment opportunities and investments. The
long awaited National Textile policy to be announced shortly will
further accelerate growth in this sector.
One of the positive factors in recent time is the increasing gap
between cotton and polyester prices. Though, there was a glut in
cotton and prices had fallen due to oversupply and less offtake from
China, the synthetic fiber prices also fell following the slump in crude
oil and its derivatives. We believe, the demand for synthetic fiber will
continue to outpace that of cotton due to the inherent price
advantage and quality improvements.
One of our big market is the NAFTA and CAFTA market comprising
of North American customers. Due to the growing preference for
locally sourced products, the demand for synthetic yarn in this
geography is increasing by 5-6% p.a. We are beneficiaries of this
due to our direct presence in South Carolina, USA through our
manufacturing facility. Moreover, there are substantial cost
advantage of manufacturing in the USA making us reasonably cost
competitive vis a vis suppliers from China, ASEAN and India.
We also have a strong opportunity for growth in the nylon yarn
segment with nylon 66 production to ramp up this year.
C. Outlook: The prospects for outsourcing of polyester/nylon yarns
remain healthy. This is because of
1) Increased capacity in India and US locations and
2) Stable INR vs USD.
While we remain optimistic about future growth, We expect margin
to remain flat at consolidated level in FY17, due to increase
in operating expenditure, interest cost and depreciation on account
of the new facility at US. The full reflection of the US plant will be felt
in FY18.
Raw Material Cost: The cost of Raw Material decreased due to
decrease in purchase price of raw materials. Our total raw material
cost decreased by 7.72% last year.
Expenditure: It reduced by 1.85% due to better negotiation.
Interest Cost: The interest cost decreased by 1.24 % due to
better management of working capital and better negotiation with
banker.
Fixed Assets: The increase in Gross Block of Fixed Asset of
Rs. 2,356.48 Lacs is due to installation of 2 new wind mill with
capacity of 1.5 MW each in the state of Madhya Pradesh and
Balance is due to normal upgradation of Plant & Machinery.
Net Current Assets: Net Current Assets have increased due to
better management of working capital.
Cash and Bank Balances: The increase in cash and bank
balances is due to increase in term deposits with banks.
E. Risk and Concerns
Raw material sourcing: We source 44% of our RM
requirements (nylon and polyester chips/fiber) from India and 56 %
from imports. For our RM sources we have multiple suppliers. Last
year, the price of our major RM POY ranged between Rs 65 to 85 per
kg and that of Nylon yarn ranged between Rs 175 to 220 per kg.
Interest Rates: The Company's average gross interest cost in the
last year decreased by 1.24 %. The company's present Debt Equity
Ratio is 0.64. The long term Debt equity Ratio is 0.58. Interest costs are
1.91% of total revenue.
Exchange Rate: 55% per cent of company revenue is in foreign
currency (Dollar, Euro & GBP) and balance is in INR. Also, we import
30.28% per cent of turnover (78.80% of which consists of raw
material purchases) creating a natural hedge to that extent. Apart
from this, from time to time forward cover is taken to hedge
exposure in foreign currency. For FY16, our average forward cover
was for 3 months of our revenue.
Inflation: The Company does not cater to retail customers. Its
sales are to the business segment and hence it has been able to
Directors� Report
12
Item 2015-2016 2014-2015 % increase
D. Financial Performance: (Rs. in Lacs)
Raw Material Cost& Purchase of Stock in trade
Expenditure
EBIDTA
Interest Cost and Debt
Fixed Assets (Gross Block)
Net Current Assets
Working Capital Finance
Cash & Bank Balances
12,254.93
7,600.95
7,197.69
508.08
20,075.28
6,716.81
9,233.57
9,868.45
14,986.31
7,744.32
5,646.31
514.48
16,430.91
5767.21
10,086.86
8,552.91
-18.23%
-1.85%
27.48%
-1.24%
22.18%
16.46%
-8.46%
15.38%
(Note: standalone performance comparison, Rupees in lacs)
pass on inflationary pressures. It does not expect any major impact
due to current high level of inflation.
F. Internal Control System and Their Adequacy: The company
has in place reasonable internal control system both from the
business process and regulatory compliance point of view.
The system is reviewed and updated on regular basis. The company
is continuously upgrading its internal control systems by measures
such as strengthening of Information Technology infrastructure and
use of external management consultant services.
G. Human Resources/Industrial Relations: The Company has
always valued and nurtured its human resources, nonetheless,
globalization, high growth of the Indian economy in recent times and
its ambitious growth targets have made talent attraction and
retention amongst the biggest challenges the company faces today.
The company has in place a good appraisal system to motivate all
the employees. The company believes in continuous development
for all its employees and for that company is planning to frame a
program wherein all the employees will be provided training into
related areas of skill development.
H. Capital Expansion and Investment:
a. Last year, we incurred a CAPEX of Rs. 3,689.51 Lac which
includes addition in Wind mill of Rs. 2,356.49 Lacs. For F.Y. 2016-17
we envisage CAPEX of Rs. 800.00 Lacs in textile segment and
CAPEX of Rs. 1,500.00 Lacs in Wind Mills.
Directors� Report
13
Particulars 2015-16
I. Value Added Statement (Rs. in Lacs)
Income from Production/Operations
Add : Other Income
CORPORATE OUTPUT
Less : Cost of Raw Materials Consumed
Less : Cost of Traded Goods
Less : Other Manufacturing Expenses
Less : Administrative & Other Expenses
EQUALS GROSS VALUE ADDED
Less : Depreciation &Amortization
Less : Extra Ordinary/Prior Period Items
EQUALS NET VALUE ADDED
ALLOCATION OF NET VALUE ADDED
To Personnel
To Taxes (including tax on proposed div.)
To Creditors (via interest)
To Investors (via dividend)
To The Company (via retained earnings)
24,871.70
2,181.88
27,053.58
11,095.02
1,159.90
4,847.21
1,922.64
8,028.81
1,014.40
�
7,014.41
831.09
1,587.87
508.07
876.78
3,210.60
7,014.41
2014-15 2013-14 2012-13 2011-12
27,229.95
1,146.98
28,376.94
12,023.68
2,962.63
4,792.65
2,173.37
6,424.61
913.55
�
5,511.06
778.28
1,383.90
514.48
668.02
2,166.38
5,511.06
619.19
1087.74
388.89
521.27
1,616.66
4,233.75
494.13
791.17
431.08
417.02
1,443.35
3,576.75
417.46
521.86
269.69
347.52
680.30
2,236.83
24,365.14
783.89
25,149.03
12,718.59
1,307.76
4,192.62
1,760.33
5,169.72
935.98
�
4,233.75
23,668.86
78.50
23,747.36
11,584.96
1,173.39
4,066.11
2,543.43
4,379.47
802.72
�
3,576.75
18,979.62
144.26
19,123.88
10,118.67
770.05
3,588.94
1,705.23
2,940.99
704.15
�
2,236.84
DIVIDEND:
Based on the Company's performance, the Company have paid an
interim dividend of Rs. 0.80 per share (80 %) on the face value of Re.
1/- each, further looking at good performance of the Company the
Directors are pleased to recommend which is subject to approval of
the members at the forthcoming AGM a final dividend of Rs. 0.25 per
share (25 %) on the face value of Re 1/- each for the financial year
ended 31st March, 2016 [Previous Year Rs 8.00 per share (80%)],
The dividend payout will aggregate Rs. 208.75 Lacs (Previous year:
Rs. 668.02 lacs) and the tax on distributed profits payable by the
Company would amount to Rs. 178.50 Lacs (Previous year Rs.
133.56 lacs).The dividend shall be paid to members, whose names
appear in the Register of Members as on 23rd September, 2016.
TRANSFER TO RESERVE:
The Company proposes to transfer of an amount of Rs 1,500 Lacs to
General Reserves (Previous year Rs. 1,500 Lacs).
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION,
FOREIGN EXCHANGE EARNINGS AND OUTGO:
The particulars relating to conservation of energy, technology
absorption, foreign exchange earnings and outgo, as required to be
disclosed under the Act, are provided in 'Annexure A' to this Report.
BOARD MEETINGS:
Pursuant to Section 173 of the Companies Act, 2013 the Board
Meetings are to be held at least four times in a year and the gap
between two Board Meetings should not be more than 120 days. Growth begins when we begin to accept our own weakness.
During 2015-16, the Board met Seven (7) times on 14th May, 2015,